Former Citi Exec Got $10M to Advise Barclays on Lehman Deal

In September 2008, Michael Klein got a killer gig just two months after leaving Citigroup: advising Barclays Group PLC on its acquisition of freefalling Lehman Brothers Holdings Inc.’s broker-dealer business. He also got a killer fee.

Klein got $10 million for his work, a job opportunity made possible only after Citi agreed to waive a non-compete agreement he had signed as part of leaving his job as head of the bank’s institutional clients group.

This all came out Friday in U.S. Bankruptcy Court in Manhattan, where Lehman is suing Barclays for allegedly getting a discount for Lehman’s broker-dealer business that wasn’t disclosed to the court. Lawyers for Barclays, who called Klein to the stand, objected to Lehman’s questioning Klein on his fee. So did Klein’s personal counsel. They said it’s fine to disclose the fee to the court, just not publicly, since that would put Klein at a competitive disadvantage in his independent consulting business.

But Judge James Peck, who presided over both the bankruptcy case and the trial, said Klein’s fee is “not only of great interest but it goes to the heart of his credibility as a witness.”

With that, Klein told the court his rate was a flat fee of $10 million, contingent on Barclays closing its deal to buy Lehman’s broker-dealer business.

By taking the post advising Barclays, Peck said, Klein “agreed to open his kimono that far.”

Meanwhile, the total cost of unwinding Lehman in bankruptcy is approaching $1 billion. Through July, the army of bankruptcy lawyers, consultants and financial advisers working on the Chapter 11 case raked in a total of $890 million.

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